July 23, 2024
Comprehensive Overview of Key Tax Amendments in the Finance Act 2024
The Finance (No. 2) Bill, 2024 amends the Income-tax Act, 1961. It continues direct tax reform through tax reliefs, simpler provisions and steps to ease taxpayer problems. The Bill also changes the Black Money (Undisclosed Foreign Income and Assets) Act, the Securities Transaction Tax (STT), the Equalisation Levy and the Prohibition of Benami Property Transaction Act.
The amendments are categorised as follows:
Rates of income-tax
Measures to promote investment and employment
Simplification and rationalisation
Widening and deepening of the tax base and anti-avoidance
Tax Administration
These changes matter to businesses and individual taxpayers that want to stay compliant and take informed financial decisions.
1. Income-Tax Rates for 2024-25: Tax rates for all categories stay the same. Rates for individuals, HUFs, AOPs and companies under sections 115BAA, 115BAB, 115BAC, 115BAD and 115BAE continue as before. Taxpayers get consistency.
2. TDS Rates for FY 2024-25: TDS rates for non-salary income, such as interest and dividends, stay largely the same. TDS on capital gains for non-domestic companies falls from 40% to 35%. There are also specific changes for non-residents' long-term and short-term capital gains.
3. TDS from Salaries for FY 2024-25: TDS rates on salaries and advance tax computations for FY 2024-25 are set out. They also cover accelerated assessments, such as provisional shipping profits and cases where an individual leaves India for good.
4. Increase in Standard Deduction: The standard deduction under section 16 rises to Rs. 75,000, to promote the new tax regime. The deduction for family pension under section 57 rises to Rs. 25,000. That deduction applies from April 1, 2025.
5. Employer Pension Contribution Deduction: Non-government employer contributions to pension schemes under section 80CCD rise from 10% to 14% of the employee's salary. That matches the limits for government employees. The change applies from April 1, 2025.
6. Tax Incentives to IFSC: The IFSC keeps its tax concessions, including exemptions for specified funds such as retail funds and Exchange Traded Funds. Income of Core Settlement Guarantee Funds in the IFSC is also exempt.
7. Amendment of Section 56: The provision that taxed excess consideration for shares over fair market value, under section 56(2)(viii), is gone from assessment year 2025-26. Non-public companies carry a lighter compliance burden.
8. Promotion of Cruise Operations: A presumptive regime now covers non-residents that run cruise ships. It treats 20% of passenger carriage receipts as taxable profit. Lease rentals they pay are exempt in the hands of the foreign recipient.
9. Block Assessment Provisions: The block assessment scheme returns for cases involving searches and requisitions. It covers the previous six assessment years and the period up to the date of the last authorisation. That makes the process simpler.
10. Assessment and Reassessment Procedures: Time limits for issuing notices fall to three years for regular cases. They run to five years when substantial income has escaped. That simplifies compliance and cuts litigation.
11. Period of Limitation for Penalties: The limitation period for penalties under section 275 is rationalised. References to the date the order is received by the Principal Chief Commissioner or Chief Commissioner are removed.
12. Set Off and Withholding of Refunds: Section 245 now allows refunds to be withheld for up to sixty days from the completion of assessment. The change applies from October 1, 2024, and prevents revenue loss.
13. Filing Appeals to ITAT: The time limit to appeal to the ITAT is now two months from the end of the month in which the order is communicated. The change applies from October 1, 2024, and makes appeals easier to track.
14. Merger of Trusts: Trusts move from the first regime under section 10(23C) to the second regime under sections 11 to 13. They keep the benefit until their current approval lapses. They can then apply under the second regime from October 1, 2024.
15. Condonation for Trusts' Registration: The Principal Commissioner or Commissioner may condone delay in filing a registration application under section 12AB where there is reasonable cause. The change applies from October 1, 2024.
16. Approval Timelines for Funds: Timelines for filing applications for approval under section 80G are rationalised. That prevents unintended exits from the approval regime. The change applies from October 1, 2024.
17. Disposing Applications for Trusts: A six-month period is set for disposing of applications for registration under section 12AB or for approval under section 80G. The change applies from October 1, 2024.
18. Merger of Exempt Trusts: Mergers of trusts under the exemption regime do not attract tax on accreted income under Chapter XII-EB. The change applies from April 1, 2025.
19. Exemptions for Trusts: Section 11(7) now refers to clauses (23EA), (23ED) and (46B). Trusts can claim exemption under those clauses from April 1, 2025.
20. Simplified Capital Gains Taxation: Two holding periods now apply: 12 months for listed securities and 24 months for other assets. Short-term capital gains tax on STT-paid equity shares rises to 20%. Long-term capital gains tax on all assets is set at 12.5%. The change applies from April 1, 2025.
21. Specified Mutual Fund Definition: The rules clarify investment proportions for specified mutual funds under section 50AA. Funds such as ETFs and Gold Mutual Funds get clear tax treatment.
22. Rationalised TDS Rates: TDS rates for insurance commissions, life insurance policy payments, lottery ticket sales commissions, brokerage payments and certain rents fall from 5% to 2%. TDS by e-commerce operators falls from 1% to 0.1%. The changes apply in 2024 and 2025.
23. TCS Credit for Salaried Employees: Section 192 now allows TCS and TDS credit from other heads of income to be considered when tax is deducted on salary. The change applies from October 1, 2024.
24. Interest Rates for Late TCS Payment: Interest on late TCS payment rises from 1% to 1.5% per month. That matches the rate for late TDS payment. The change applies from April 1, 2025.
25. Remuneration Deduction for Partners: The deduction for remuneration to working partners rises from Rs. 1.5 lakh to Rs. 3 lakh. It is allowed on the first Rs. 6 lakh of book profit, or where there is a loss. The change applies from April 1, 2025.
26. TCS Credit for Minors: Parents may now claim TCS credit collected in the name of a minor under section 206C. The change applies from October 1, 2024.
27. Tax on Share Buy-Back: Tax on buy-back transactions now follows the wider framework for capital gains and dividends. Tax liabilities stay consistent.
28. Revised Securities Transaction Tax: STT rates are updated to match market practice. The changes take effect on the dates stated in the amendments.
29. Income from House Property: The reporting needed for income from letting out house property is clarified. Reporting has to be accurate and on time from April 1, 2025.
30. Amendment of Section 47: Certain transactions, such as gifts and transfers to irrevocable trusts, are excluded from the definition of 'transfer' for capital gains tax. The change applies from April 1, 2025.
31. TDS on Payments to Partners: TDS now applies to payments above Rs. 20,000 that partnership firms make to partners. The change applies from April 1, 2025.
32. TCS on Luxury Goods: TCS now covers luxury goods above Rs. 10 lakh. The change applies from January 1, 2025.
33. TDS on Immovable Property Sales: The TDS threshold applies to the total consideration paid to all transferors. The change applies from October 1, 2024.
34. TDS on Savings Bonds: TDS now applies to interest above Rs. 10,000 on Floating Rate Savings Bonds. The change applies from October 1, 2024.
35. Life Insurance Expense Deductions: The change stops life insurance companies from misusing non-business expense claims. It applies from April 1, 2025.
36. Foreign Tax Credits: Taxes withheld outside India now form part of total income calculations. The change applies from April 1, 2025.
37. Excluding Certain Payments from Section 194C: Payments under section 194J are excluded from the definition of "work" in section 194C. The change applies from October 1, 2024.
38. Disallowance of Settlement Expenses: Settlement expenses for legal contraventions cannot be claimed as business expenses. The change applies from April 1, 2025.
39. Amendment of Section 55: Section 55 redefines "cost of acquisition" and "cost of improvement" for certain cases. The change applies from April 1, 2025.
40. Vivad se Vishwas Scheme 2024: Taxpayers can settle pending tax disputes by paying a set percentage of the disputed tax.
41. Equalisation Levy: A 2% levy on the consideration of non-resident e-commerce operators does not apply to income received after August 1, 2024. The levy covers income from April 1, 2020, to August 1, 2024.
42. Black Money Act Amendments: The penalty threshold for undisclosed foreign income and assets rises from Rs. 5 lakh to Rs. 20 lakh. The change applies from October 1, 2024.
43. Section 276B Amendments: Prosecution is exempt where TDS for a quarter is deposited before the due date for filing the TDS return. The change applies from October 1, 2024.
44. Time Limitation for Default Orders: The time limit for orders that treat a person as in default falls to six years from the end of the financial year. The change applies from April 1, 2025.
45. Section 200A Scope: Processing now covers statements filed by non-deductors, such as Form 26QF filed by exchanges. The change applies from April 1, 2025.
46. Lower Deduction Certificates: Lower deduction certificates can now be obtained for transactions under sections 194Q and 206C(1H). The change applies from October 1, 2024.
47. TCS Exemptions: The Central Government may exempt certain persons or classes from the TCS provisions. The change applies from October 1, 2024.
48. Correction Statement Time Limit: A six-year limit now applies to TDS/TCS correction statements, counted from the end of the financial year. The change applies from April 1, 2025.
49. Penalty for Late Statements: No penalty applies to a late TDS/TCS statement filed within one month, where the tax and interest are paid. The change applies from April 1, 2025.
50. Statements by Liaison Offices: Non-residents' liaison offices must file an annual statement of activities. Delay attracts a penalty.
51. Arm's Length Price for Domestic Transactions: The Transfer Pricing Officer may now set the arm's length price for specified domestic transactions that were not referred or reported at the start. The change applies from April 1, 2025.
52. Aadhaar Enrolment ID Discontinuation: An Aadhaar Enrolment ID can no longer be used in place of an Aadhaar number for PAN applications and returns. The change applies from October 1, 2024.
53. Advance Rulings Amendments: Applications transferred to the Board for Advance Rulings may be withdrawn by October 31, 2024, if no order under section 245R(2) has been passed.
54. Commissioner (Appeals) Powers: The Commissioner (Appeals) may now set aside the best judgment assessment and send the case back to the Assessing Officer. The change applies from October 1, 2024.
55. Section 271FAA Amendment: Penalties apply for inaccurate financial transaction statements and for due diligence failures. That aligns the rule with the AEOI framework from October 1, 2024.
56. Black Money Act Reference: Liabilities under the Black Money Act now count when a person seeks a tax clearance certificate before leaving India. The change applies from October 1, 2024.
57. Assessment Time-Limits: The time limits for starting assessment procedures are cut, and the various procedures are aligned. The change applies from September 1, 2024.
58. Section 80G Amendment: Approval processes for deductions for charitable donations are streamlined. That improves efficiency from April 1, 2025.
59. Removing NHB Reference: The National Housing Bank reference in section 43D is removed. That matches the RBI's current regulatory framework from April 1, 2025.
60. Adjusting Liabilities Under Black Money Act: Liabilities under the Black Money Act may now be adjusted against assets seized in a search. The change applies from April 1, 2025.
61. Benami Property Act Amendments: Enforcement powers for prosecuting Benami property transactions are strengthened. The change applies from April 1, 2025.
The Finance (No. 2) Bill, 2024 amends the Income-tax Act, 1961. It continues direct tax reform through tax reliefs, simpler provisions and steps to ease taxpayer problems. The Bill also changes the Black Money (Undisclosed Foreign Income and Assets) Act, the Securities Transaction Tax (STT), the Equalisation Levy and the Prohibition of Benami Property Transaction Act.
The amendments are categorised as follows:
Rates of income-tax
Measures to promote investment and employment
Simplification and rationalisation
Widening and deepening of the tax base and anti-avoidance
Tax Administration
These changes matter to businesses and individual taxpayers that want to stay compliant and take informed financial decisions.
1. Income-Tax Rates for 2024-25: Tax rates for all categories stay the same. Rates for individuals, HUFs, AOPs and companies under sections 115BAA, 115BAB, 115BAC, 115BAD and 115BAE continue as before. Taxpayers get consistency.
2. TDS Rates for FY 2024-25: TDS rates for non-salary income, such as interest and dividends, stay largely the same. TDS on capital gains for non-domestic companies falls from 40% to 35%. There are also specific changes for non-residents' long-term and short-term capital gains.
3. TDS from Salaries for FY 2024-25: TDS rates on salaries and advance tax computations for FY 2024-25 are set out. They also cover accelerated assessments, such as provisional shipping profits and cases where an individual leaves India for good.
4. Increase in Standard Deduction: The standard deduction under section 16 rises to Rs. 75,000, to promote the new tax regime. The deduction for family pension under section 57 rises to Rs. 25,000. That deduction applies from April 1, 2025.
5. Employer Pension Contribution Deduction: Non-government employer contributions to pension schemes under section 80CCD rise from 10% to 14% of the employee's salary. That matches the limits for government employees. The change applies from April 1, 2025.
6. Tax Incentives to IFSC: The IFSC keeps its tax concessions, including exemptions for specified funds such as retail funds and Exchange Traded Funds. Income of Core Settlement Guarantee Funds in the IFSC is also exempt.
7. Amendment of Section 56: The provision that taxed excess consideration for shares over fair market value, under section 56(2)(viii), is gone from assessment year 2025-26. Non-public companies carry a lighter compliance burden.
8. Promotion of Cruise Operations: A presumptive regime now covers non-residents that run cruise ships. It treats 20% of passenger carriage receipts as taxable profit. Lease rentals they pay are exempt in the hands of the foreign recipient.
9. Block Assessment Provisions: The block assessment scheme returns for cases involving searches and requisitions. It covers the previous six assessment years and the period up to the date of the last authorisation. That makes the process simpler.
10. Assessment and Reassessment Procedures: Time limits for issuing notices fall to three years for regular cases. They run to five years when substantial income has escaped. That simplifies compliance and cuts litigation.
11. Period of Limitation for Penalties: The limitation period for penalties under section 275 is rationalised. References to the date the order is received by the Principal Chief Commissioner or Chief Commissioner are removed.
12. Set Off and Withholding of Refunds: Section 245 now allows refunds to be withheld for up to sixty days from the completion of assessment. The change applies from October 1, 2024, and prevents revenue loss.
13. Filing Appeals to ITAT: The time limit to appeal to the ITAT is now two months from the end of the month in which the order is communicated. The change applies from October 1, 2024, and makes appeals easier to track.
14. Merger of Trusts: Trusts move from the first regime under section 10(23C) to the second regime under sections 11 to 13. They keep the benefit until their current approval lapses. They can then apply under the second regime from October 1, 2024.
15. Condonation for Trusts' Registration: The Principal Commissioner or Commissioner may condone delay in filing a registration application under section 12AB where there is reasonable cause. The change applies from October 1, 2024.
16. Approval Timelines for Funds: Timelines for filing applications for approval under section 80G are rationalised. That prevents unintended exits from the approval regime. The change applies from October 1, 2024.
17. Disposing Applications for Trusts: A six-month period is set for disposing of applications for registration under section 12AB or for approval under section 80G. The change applies from October 1, 2024.
18. Merger of Exempt Trusts: Mergers of trusts under the exemption regime do not attract tax on accreted income under Chapter XII-EB. The change applies from April 1, 2025.
19. Exemptions for Trusts: Section 11(7) now refers to clauses (23EA), (23ED) and (46B). Trusts can claim exemption under those clauses from April 1, 2025.
20. Simplified Capital Gains Taxation: Two holding periods now apply: 12 months for listed securities and 24 months for other assets. Short-term capital gains tax on STT-paid equity shares rises to 20%. Long-term capital gains tax on all assets is set at 12.5%. The change applies from April 1, 2025.
21. Specified Mutual Fund Definition: The rules clarify investment proportions for specified mutual funds under section 50AA. Funds such as ETFs and Gold Mutual Funds get clear tax treatment.
22. Rationalised TDS Rates: TDS rates for insurance commissions, life insurance policy payments, lottery ticket sales commissions, brokerage payments and certain rents fall from 5% to 2%. TDS by e-commerce operators falls from 1% to 0.1%. The changes apply in 2024 and 2025.
23. TCS Credit for Salaried Employees: Section 192 now allows TCS and TDS credit from other heads of income to be considered when tax is deducted on salary. The change applies from October 1, 2024.
24. Interest Rates for Late TCS Payment: Interest on late TCS payment rises from 1% to 1.5% per month. That matches the rate for late TDS payment. The change applies from April 1, 2025.
25. Remuneration Deduction for Partners: The deduction for remuneration to working partners rises from Rs. 1.5 lakh to Rs. 3 lakh. It is allowed on the first Rs. 6 lakh of book profit, or where there is a loss. The change applies from April 1, 2025.
26. TCS Credit for Minors: Parents may now claim TCS credit collected in the name of a minor under section 206C. The change applies from October 1, 2024.
27. Tax on Share Buy-Back: Tax on buy-back transactions now follows the wider framework for capital gains and dividends. Tax liabilities stay consistent.
28. Revised Securities Transaction Tax: STT rates are updated to match market practice. The changes take effect on the dates stated in the amendments.
29. Income from House Property: The reporting needed for income from letting out house property is clarified. Reporting has to be accurate and on time from April 1, 2025.
30. Amendment of Section 47: Certain transactions, such as gifts and transfers to irrevocable trusts, are excluded from the definition of 'transfer' for capital gains tax. The change applies from April 1, 2025.
31. TDS on Payments to Partners: TDS now applies to payments above Rs. 20,000 that partnership firms make to partners. The change applies from April 1, 2025.
32. TCS on Luxury Goods: TCS now covers luxury goods above Rs. 10 lakh. The change applies from January 1, 2025.
33. TDS on Immovable Property Sales: The TDS threshold applies to the total consideration paid to all transferors. The change applies from October 1, 2024.
34. TDS on Savings Bonds: TDS now applies to interest above Rs. 10,000 on Floating Rate Savings Bonds. The change applies from October 1, 2024.
35. Life Insurance Expense Deductions: The change stops life insurance companies from misusing non-business expense claims. It applies from April 1, 2025.
36. Foreign Tax Credits: Taxes withheld outside India now form part of total income calculations. The change applies from April 1, 2025.
37. Excluding Certain Payments from Section 194C: Payments under section 194J are excluded from the definition of "work" in section 194C. The change applies from October 1, 2024.
38. Disallowance of Settlement Expenses: Settlement expenses for legal contraventions cannot be claimed as business expenses. The change applies from April 1, 2025.
39. Amendment of Section 55: Section 55 redefines "cost of acquisition" and "cost of improvement" for certain cases. The change applies from April 1, 2025.
40. Vivad se Vishwas Scheme 2024: Taxpayers can settle pending tax disputes by paying a set percentage of the disputed tax.
41. Equalisation Levy: A 2% levy on the consideration of non-resident e-commerce operators does not apply to income received after August 1, 2024. The levy covers income from April 1, 2020, to August 1, 2024.
42. Black Money Act Amendments: The penalty threshold for undisclosed foreign income and assets rises from Rs. 5 lakh to Rs. 20 lakh. The change applies from October 1, 2024.
43. Section 276B Amendments: Prosecution is exempt where TDS for a quarter is deposited before the due date for filing the TDS return. The change applies from October 1, 2024.
44. Time Limitation for Default Orders: The time limit for orders that treat a person as in default falls to six years from the end of the financial year. The change applies from April 1, 2025.
45. Section 200A Scope: Processing now covers statements filed by non-deductors, such as Form 26QF filed by exchanges. The change applies from April 1, 2025.
46. Lower Deduction Certificates: Lower deduction certificates can now be obtained for transactions under sections 194Q and 206C(1H). The change applies from October 1, 2024.
47. TCS Exemptions: The Central Government may exempt certain persons or classes from the TCS provisions. The change applies from October 1, 2024.
48. Correction Statement Time Limit: A six-year limit now applies to TDS/TCS correction statements, counted from the end of the financial year. The change applies from April 1, 2025.
49. Penalty for Late Statements: No penalty applies to a late TDS/TCS statement filed within one month, where the tax and interest are paid. The change applies from April 1, 2025.
50. Statements by Liaison Offices: Non-residents' liaison offices must file an annual statement of activities. Delay attracts a penalty.
51. Arm's Length Price for Domestic Transactions: The Transfer Pricing Officer may now set the arm's length price for specified domestic transactions that were not referred or reported at the start. The change applies from April 1, 2025.
52. Aadhaar Enrolment ID Discontinuation: An Aadhaar Enrolment ID can no longer be used in place of an Aadhaar number for PAN applications and returns. The change applies from October 1, 2024.
53. Advance Rulings Amendments: Applications transferred to the Board for Advance Rulings may be withdrawn by October 31, 2024, if no order under section 245R(2) has been passed.
54. Commissioner (Appeals) Powers: The Commissioner (Appeals) may now set aside the best judgment assessment and send the case back to the Assessing Officer. The change applies from October 1, 2024.
55. Section 271FAA Amendment: Penalties apply for inaccurate financial transaction statements and for due diligence failures. That aligns the rule with the AEOI framework from October 1, 2024.
56. Black Money Act Reference: Liabilities under the Black Money Act now count when a person seeks a tax clearance certificate before leaving India. The change applies from October 1, 2024.
57. Assessment Time-Limits: The time limits for starting assessment procedures are cut, and the various procedures are aligned. The change applies from September 1, 2024.
58. Section 80G Amendment: Approval processes for deductions for charitable donations are streamlined. That improves efficiency from April 1, 2025.
59. Removing NHB Reference: The National Housing Bank reference in section 43D is removed. That matches the RBI's current regulatory framework from April 1, 2025.
60. Adjusting Liabilities Under Black Money Act: Liabilities under the Black Money Act may now be adjusted against assets seized in a search. The change applies from April 1, 2025.
61. Benami Property Act Amendments: Enforcement powers for prosecuting Benami property transactions are strengthened. The change applies from April 1, 2025.
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If you are evaluating cross-border expansion, restructuring, or strengthening compliance and audit readiness, we can help you plan and execute with clarity.